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Tuesday, April 3, 2012

Will IT Transformation Finally Reshape the Perspective of IT Value?

A topic debated in a LinkedIn forum in July 2012 questioned one of the most popular buzzword of the moment: IT Transformation. The questions were "are businesses substituting continuous improvement with a new term that implies radical change?", "should transformation be the new mantra for process professionals?" and "how is it different from normal improvement activities?"The fact of the matter is, a lot of people around the globe have been misled, IT Transformation, as it is presented today, is not the new paradigm for better IT contribution to value. Higher IT value transcends the basic concerns of reducing IT costs through outsourcing and streamlining business operations through deploying software, application systems and infrastructures.

THE NOTION OF IT TRANSFORMATION IS UNCLEAR. YET, IT SIGNALS DESIRES FOR NEW PERSPECTIVES ABOUT IT

The meaning of this word in the IT industry's current context is confusing and varies according to people, contexts, industries and businesses. For some, it is just a substitution of today's large system integration endeavors while for others it refers to large Enterprise Architecture transformations. The term is unclear.To my view the rise of the term IT transformation betrays within the business community the need for a new perspective of the contribution of IT to business value, a new perspective that goes beyond the basic process improvement and IT tools and infrastructures deployment. It seems that slowly but increasingly corporations are questioning today's IT value paradigm and its corollary: the technology-centric perspective that's been around for decades. Simply put, technology-centric perspective is the belief that streamlining processes through deploying sophisticated software, application systems and infrastructures is the only way to get superior IT value.An increasing number of people have been challenging the technology-centric perspective. Dave Gardner a remarkable author, management consultant, and speaker, in a remarkable article recommended that businesses "implement change, not applications" arguing that "companies aren't implementing an information technology system; companies are changing the way work gets done." He concluded that "business benefit comes from the integration of people and process with information technology. Most project focus too much attention on the technology and too little on people, process and change management."

The overemphasis on software, application systems and infrastructures at the expense of other performance factors e.g., processes, organizational capabilities and even corporate culture is surprising and has over the years promoted the false notion that technology alone could bring in value.

MISINTERPRETATION OF THE NOTION OF VALUE DOUBLED WITH DEFICIENT STRATEGIC MANAGEMENT PRACTICES IS THE PROBLEM

Misinterpretation of Value Exacerbated by Declining Strategic Management Practices Have Resulted in a Perspective that Turned IT into a CommodityA closer look at how a lot of business leaders and IT experts consider the notion of value reveals that the mechanisms underpinning value creation - in both the literal and figurative senses - are ignored.For about two decades, value have been seen from the sole customer's benefit and cost of production perspectives; the mantra was and is still to deliver more at little IT costs. The increasing success of IT outsourcing initiatives and more importantly the increasing demand for cloud computing solutions substantiate that fact. No one would dispute the fact that delivering more with less is definitely a substantial competitive advantage. However, this perspective stresses the sole cost-effectiveness dimension of value; other key dimensions, examples, accelerated time-to-market, first-to-market advantages and enhanced customer experience are not taken into account. These dimensions are actually value propositions and competitive advantages that help businesses differentiate themselves from their competitors and increase their customers' value.To that question asked to a business leader, proponent of the cost-effectiveness approach to value, I never got a clear answer- "What value a business would derive from the cost-effectiveness of its core operations if it is unable to compete against its competitors because of products / services delivered late (time-to-market issues) or because of a poorly designed, complex and confusing online process that bother clients (customer experience issues)?"

One can wonder if this short-sighted understanding of value is not correlated to the deficient strategic management practices that proliferated in businesses over the last two decades. As a matter of fact, strategic management practices have been oversimplified; strategy planning which purpose is to plan financial gains, identify market segments to focus on, identify required changes on business assets, and define the tactics to implement changes is today limited to defining financial objectives, invesments to make and performance objectives and finally deliver vague strategic plans that no one follows.With regard to strategy execution which should be concerned with making sure that defined objectives are being achieved and that defined tactics are still enabling objectives achievement, what we see is uncoordinated projects ran across organizations monitored based on reports designed to stress the sole risks and financial issues at the expense of operational matters.The Incomprehensible Influence of Some of the Major Management Consulting BrandsThe influence of certain major consulting brands as to strategic management practices is incomprehensible; under the pretext that their primary business is to provide corporations with immediate solutions, they fostered ad hoc management practices that finally led to the oversimplification of strategic management practices. They thrive on the situation and make a lot of money with highly sophisticated strategic management software supposedly designed to substitute all the interactions, consensuses, commitments and policies required to achieve strategic objectives and bring in value.Even the brilliant concepts of Project Portfolio Management (PPM) and Project Management Office (PMO) have been affected.PPM is probably the most powerful management concept created since the development of the Value Chain concept by Michael Porter in his best seller, Competitive Advantage: Creating and Sustaining Superior Performance. The PPM concept advocates the idea that focusing the organization's projects and resources on business priorities not only results in higher value but also offers an unprecedented opportunity to reconcile business and IT and get them work together. What we see on the ground are highly sophisticated PPM software supposed to substitute all the interactions, consensuses, commitments and policies required to achieve strategic objectives. They don't.As to the PMO concept its initial intent was to leverage project management practices to support strategy execution. Over the years it took varied forms and what we see on the ground is businesses struggling to standardized their project management processes as though they sought to take their employees back to the Assembly line era were workers had to repeat again and again the same set of tasks. This fact is confirmed by Todd Williams President of eCameron Inc. when he says "Process is about 20% of what it takes to run a project. It takes people, management, and leadership to make projects consistently successful. Process only helps since it provides the managers and executives a set of guideposts to judge a project. Using piles of processes, they try to devolve projects into a checklist of activities, thinking that you can follow the steps and the project will be successful."There is no doubt that business practices are at or near a critical inflection point in
strategic management and IT contribution to value; this requires a complete understanding of the notion of value.

The Extended Notion of Value Offers a Better Perspective of What It Takes to Increase IT Contribution to ValueValue in reality is not only a matter of customers' benefits and little IT costs, it is actuallypart of a larger framework commonly known as Market; it puts forward three determinants of value: customer's benefit, competitor's and the firm's value propositions and competitive advantages.Customer's benefit as the name suggests refers to the benefits a customer derives from the use of a product or a service. Competitor suggests that a firm is not alone in a market and that it has to deal with competitors. Value proposition relates to the promises of value formulated by the competition and the firm to be favoured by customers. Competitive advantage as the name the suggests is an advantage that the firm has over its competitors that allows it to generate greater sales, increase customers' value and keep them loyal.

As illustrated in exhibit 1, the extended notion of value teaches us that value results from two factors, value proposition that defines the customer experience the firm is willing to deliver and competitive advantage that allows the firm to outperform competitors and differentiate itself. Let's say it straight, these notions are not part of the discussions between the business and IT. The fact of the matter is the business and IT share a productivity-oriented perspective of IT contribution where IT value is seen from the sole perspective of the sophisticated software, application systems and infrastructure that it cost-effectively deployed to make business operations efficient.

At the risk of exaggerating and based on what I have been witnessing on the ground for 22 years, most IT strategy and project portfolio planning sessions are based on the same limited agenda that overtime turned IT into a commodity: (1) the business defines its goals, objectives and value propositions, (2) the business asks IT to provide its perspective in terms of application systems and infrastructures to invest in and (3) IT delivers a list of software, application systems and infrastructures to invest in.

VALUE RESULTS FROM THE IMPLEMENTATION OF COMPREHENSIVE CHANGES AND NOT ONLY FROM THE DEPLOYMENT OF APPLICATION SYSTEMS AND INFRASTRUCTURE

Change Management is Central to IT Contribution to ValueDave Gardner and all the challengers of the current IT paradigm are right, Change Management is the key element for increasing IT contribution to value; it addresses five essential dimensions of businesses i.e., People, Process, Structure, Technology and Culture and provide the means to combine them into powerful business assets.People relates to the human factor and refers to all elements helping people make a positive impact on value creation. Process relates to business operations and refers to the means necessary to increase their efficiency and effectiveness. Structure relates to the organizational and management mechanisms and practices used to ensure effective coordination, collaboration and decision-making while technology refers to the software, application systems and infrastructure leveraged to make business operations effective and efficient.Change is about adjusting the organization's assets i.e., people, process, structure and technology to the requirements of the target business strategy; it should not be confused with Transition which is concerned with making sure through communication and training campaigns that people adhere to changes. Value is Part of a Comprehensive Strategic Management CycleAs illustrated in exhibt 2, value is part of a virtuous strategic management cycle where change is the central element, strategy planning clarifies expected value along with changes in business assets to undertake, and strategy execution in addition to monitor the execution of strategy ensures implementation of changes intended to guarantee the delivery of expected value:

Value-oriented implementation of changes is based on the primary principle that people, structure and culture are the key determinants to unlocking the potential of processes and technology. It is obvious that the mess resulting from inappropriate distribution of functional roles and responsibilities, from absence of adherence to organizational policies and from deficient management practices will prevent processes and technologies to deliver their potential.

Importance of managing all aspect of changes is underlined by Tracy M. LucasProfessional Change & Programme/Projects Consultant; she raises concerns about executive awareness of the implications of strategy implementation: "The understanding from the execs and senior managers that there is a huge amount of leg work to turn a strategy in to a sustainable set of actions/tactics/project or whatever, but ultimately change by any other name, must be fully understood for it to work. This used to be called effective engagement, something which in recent years barely seems to leave the boardroom in my experience."

In all cases failure to holistically address all aspects of changes i.e., people, process, structure, culture and technology results in extremly poor value.

CURRENT STANDARDS AND FRAMEWORKS NEED UPGRADES. ILLUSTRATION!

Not sure today's IT best practice models are tailored to address holistically the people, process, structure, culture and technology dimensions of organizations; they are focused on processes and tools and might not be properly equipped to tackle changes.Let me tell you about one of my recents audit. Sometimes facts are better than long demonstrations.

XYZ Inc., fake name and industry but real company, was involved in entertainment and media and had activities in publishing, music, television and communication.The company was struggling with a substantial investment in ITIL that resulted in severe organizational tensions. Investments included comprehensive process packages, premium ITIL change management software and trainings.The CIO Thinks the Devil is in the DetailsIn the meeting that kicked off the project, the CIO Myriam Azizet made clear her expectations "Philippe we count on you to help us understand what's going wrong from 4 perspectives: people, process, structure and tool."The Audit Methodology and Framework Show LimitsThe audit framework I was supposed to use built upon ITIL and consequently stressed the idea that value results primarily from high-performance processes. It did not consider key determinants such as executive involvement, empowerment of vital IT functions, executive endorsement of policies and charters and consequently customizing my company’s ITIL assessment framework was the only way to meet Myriam’s expectations.

The audit approach was to check implementation of required ITIL processes and related features and assign maturity levels through measuring the extent to which they were implemented.

The Audit Methodology and Framework are Customized to Meet the Client's MethodoologyLike most IT audit frameworks, the one I was supposed to use did not properlyaddress organizational and managerial issues. Recommended assessment areas such as RACI (Responsible, Accountable, Consulted and Informed) model, KPI (Key Performance Indicators) and SLA (Service Level Agreement) were too limited to answer fundamental questions including "What consensus over organizational and operatinal issues should be built between executif, staff management and experts to benefit ITIL's value?", "How should be distributed roles and responsibilities across the executive, staff management and experts to ensure effective decision-making and coordination of ITSM (IT Service Management activities?", "What vital functions should be linked together to ensure effectiveness and efficiency of ITSM operations?", "What collaboration enablers should be leveraged to ensure effective linkage of vital functions?" and "What ITIL best practices should be mobilized as part of the solution to deliver?"The organizational piece added to supplement the ITIL assessment framework as actually a set of managerial best practices presented in the form of organizational requirements.The Audit Toolkit Turns into an ITIL-based Organizational The added organizational piece extended the initial scope of the audit and turned it into a complete organizational assessment of the firm’s ITSM capability that covered the people, process, structure and tool factors.

The audit approach shifted from a basic assessment of ITIL processes maturity levels to a complete methodology seeking to measure the extent to which organizational structures and mechanisms as well as managerial practices would unlock the value of ITIL processes. Outcomes were outstanding!

Kudos, Client's Satisfaction and Expectations Exceeded

Organizational dysfunctions and severe deficient management practices were pointed out; examples included expectations mismatch between functions, deficient functions segregation between those facilitating work and relationships and those assuming service operational delivery, and deficient executive endorsement of vital ITSM functions e.g., change management and release management.The overhelming kudos received following my presentation of the findings and recommendations surprised me; I was literally bombarded with kudis from the CIO "I have in front of me a high value consulting work, I need to know how we're going to take advantage it", from the VP Production "This is an amazing work Philippe. Thank you did a great job", from the project sponsor "Insightful report..." and from the Director of Process Improvement "This approach is unique..."Discussions with participants allowed me to understand the reason of the client's excitement; the ITIL-based Application Management capability I recommended offered substantial benefits, examples included improvement of executive coordination and decision-making through the establishment of an ITSM governance board involving representatives of all vital functions, proactive management of change requests through the establishment of a middle management level Change Advisory Board (CAB) involving representatives of all vital functions.

WHY A VALUE-ORIENTED IT ORGANIZATION MODEL WILL DO

The principles applied to improve XYZ Inc ITSM capabilities and those of many other firms across my 22-year IT and Business Transformation are the foundations of the Value-Oriented IT Organization Model. This model builds upon the belief that value transcends the IT and business boundaries and that a common language and framework putting together the business and IT is needed; it will be discussed in my next post in January 28, 2013.Your Comments are Welcomed!

Thanks for the mention, Philippe! I've written about this subject for several years now and you're doing a great job peeling back the layers of the onion. IT will improve its image when it reaches across the table and asks "how can we help? How can we support better business enablement?" IT, in an effort to add value, pushes back too hard in most instances. I want IT to be a partner in business success, not take on an adversarial role. We all win together, or, we all lose together. Something to think about.